The Special Economic Zones Act, 2005 is a legislation which was aimed at overcoming the shortcomings of an unstable fiscal regime and to attract larger foreign investments in India. With a view to avoiding multiplicity of controls and clearances and to incentivize entrepreneurs to manufacture goods in these zones, the Act gives certain exemptions in the form of various subsidies. There is thus a danger that the SEZ Act may fall foul of provisions of the WTO Agreement, which India is bound to comply with. This paper analyses the provisions of the SEZ Act especially in light of the WTO Subsidies Agreement in particular, and tests its compliance with the Agreement on Subsidies and Countervailing Measures.